How to use your retirement savings once you’re retired

After years of working, you’d like to think that your blood, sweat and tears has finally paid off and you can now look forward to enjoying the little nest egg you’ve built to retire on. 

Use your retirement wisely

But while one hurdle may be over, you may now be facing another.

What to do with all your retirement savings?

You could leave it untouched until you absolutely need it, or you could start paying yourself a pension using an account-based pension from your super fund. You could also withdraw all or some of it as a lump sum.

Let’s face it, this decision can be one of the hardest to make - especially once you’re retired and are unlikely to re-enter the workforce.

But the truth is this: how you decide to use your retirement savings really comes down to your personal preference.

Take advantage of your entitlements 

If you’re over the age of 60 when you receive a payment from your super fund, whether as a lump sum or a pension, in most cases, it will be tax-free.[1]

And the good news is, it doesn’t matter how much you withdraw – the tax treatment remains the same.  

If you’re under the age of 60, it’s likely you’ll have to pay some tax, but it depends on the size of the payment. So, if you’re going to take out a lump sum from your super, consider the implications it will have before your 60th birthday.

How super investments are taxed

If you choose to leave your money in the accumulation phase (super earned during your working life), then any earnings made from your super investments will be taxed at the rate of 15 per cent.[2]

If you decide to change how your super is invested, or earn capital gains in the fund, that gain will also be taxed at 15 per cent - unless you’ve had the investment for at least 12 months. In this case you’ll pay 10 per cent tax.[2]

However, when you meet the rules to move your money across to an account-based pension (sometimes referred to as an allocated pension), then any money you make from your investment or capital gains earned, will be tax-free.[3]

Account-based pensions offer tax-effective income

In addition to being exempt from paying tax if you’re over 60, with an account-based pension, you can access a lump sum at any time.

There’s also a few things to be aware of however.

Limit on the amount you can transfer

There is a limit on the amount of money that can be transferred. This therefore affects the amount of retirement savings you may be tax exempt from.

Currently the general limit is set at $1.69 million if you have not held an account-based pension until after 1 July 2023.4

Set amount that must be paid

A key requirement of an account-based pension is that a set amount that must be paid (or allocated) to you each year based on your age. 

For example, if you’re under age 65 at the start of the financial year, the minimum payment during the course of the year is 4 per cent of your account balance at the start of the year.  If you’re aged 65 to 74, it’s a 5 per cent minimum and the minimum annual payment continues to increase in bands as you get older.[4]

Selling your underlying investments

You may want to find out if your super fund requires you to sell your underlying investments as with this option, you won’t have to realise any capital gains at that time. You may also want to check that they offer an account-based pension too as some don’t.

Paying yourself a lump sum

Taking out a lump sum could be a good option if you’re keen to pay off some (or all) of your outstanding debts, such as a mortgage or a credit card.

But the one thing to remember about lump sum withdrawals is that once you have taken the money out of your retirement savings, you may not be able to put it back in if you change your mind.

Bottom line: retirement is an important stage in anyone’s life.  Making sure you take the time to consider your options, and seeking professional advice where necessary, are steps that may place you on a journey to a happier retirement. 

Next: How much will you need to enjoy your retirement?


1. Australian Taxation Office:
2. Australian Taxation Office:
3. ASIC Money Smart:
4. Australian Taxation Office:

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Things you should know

The article was prepared by Bryan Ashenden, Head of financial literacy and advocacy at BT Financial Group and is current as at 1 July 2023.

This information does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness, having regard to these factors before acting on it. This information provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such. This information may contain material provided by third parties derived from sources believed to be accurate at its issue date. While such material is published with necessary permission, no company in the Westpac Group accepts any responsibility for the accuracy or completeness of, or endorses any such material. Except where contrary to law, we intend by this notice to exclude liability for this material. 

Any tax considerations outlined in this publication are general statements, based on an interpretation of the current tax law, and do not constitute tax advice.  The tax implications of super investments can impact individual situations differently and you should seek specific tax advice from a registered tax agent or registered tax (financial) adviser.